2 April 2017

A company is deemed to be eligible for inclusion in the index by the Index Provider if the company is a producer and/or supplier of medical marijuana and/or medical cannabis, biotechnology companies that are engaged in research and development of cannabinoids, companies that offer hydroponics supplies and equipment clearly aiming to increase efficiency in marijuana cultivation and companies mainly

engaged in leasing property to medical-use cannabis growers.The index is calculated as a gross total return index in CAD and adjusted quarterly.

More Information at   https://www.solactive.com/?s=nammar&index=DE000SLA24K3

New Cannabis have reviewed the index and it appears although better than previous market measuring tools they still aren’t overly impressed

We think that this fund is constructed much better than the pending ETF Managers’ Emerging Agrosphere ETF, primarily because the latter includes some very sketchy names, several of which don’t even file with the SEC. 

With that said, HMMF has some shortcomings. First, the index lacks diversification, as it has just 16 names, with the top 6 representing 60%. Second, it looks like they stretched to make this work, including some odd names that have big weightings but that aren’t really “medical marijuana”, including synthetic drug makers Insys and Zynerba as well as Scotts-MiracleGro, which has only about 10% exposure to the cannabis market and is more exposed to a different type of ‘grass’. These three represent 27.5% of the index. Finally, because it will listed in Canada, the ETF will likely have poorer liquidity than were it to have listed in the United States.

We believe that the fund could appeal to investors with less than $10,000 or so given given the management fee of 0.75%. It would be fairly easy to replicate this portfolio on one’s own given the limited number of securities. For those that want to invest in Canadian LPs, which make up the majority of HMMF, 420 Investor offers a model portfolio (one of four in total) that is updated monthly and is actively managed to beat its proprietary LP index. This is available as part of the monthly newsletter as well as the full service. The bottom-line is that we think the HMMF ETF is a step forward in the evolution of the market for publicly-traded cannabis stocks. Even with its flaws, it is a decent first effort. 

For those interested in Canadian LPs, one that won’t be in HMMF initially is ABcann Medicinals, which recently joined us as a sponsor, as it’s not yet trading publicly (expected later this month). ABcann has been generating revenue for almost 2 years, achieving double the typical yield per square foot in its highly automated computer systems compared to peers, according to PI Financial. The organic growing process yields consistent pharmaceutical-grade product that helps it maintain a 94% customer retention rate. To learn more about ABcann, click the green “Get More Info” button on their page and fill out the form.